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Networks, firms, and trade

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  • Bastos, Paulo
  • Silva, Joana

Abstract

Fixed costs associated with learning about demand and setting up distribution networks are expected to be lower when there are more potential contacts in the destination market, suggesting a greater probability of market entry and larger export revenues. The authors match historically-determined emigration stocks with detailed firm-level data from Portugal to examine the effect of migrant networks on these export outcomes. They find that larger stocks of emigrants in a given destination increase export participation and intensity. In addition, they show that the former of these effects tends to be more pronounced among firms that are more likely to have close ties with the emigrants. These results are consistent with a multiple-destination version of the Melitz (2003) model featuring market-specific entry costs and idiosyncratic firm-destination demand shocks.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6279.

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Date of creation: 01 Nov 2012
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Handle: RePEc:wbk:wbrwps:6279

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Keywords: Economic Theory&Research; E-Business; Technology Industry; Markets and Market Access; Airports and Air Services;

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References

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  1. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  3. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  4. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
  5. Martina Lawless, 2010. "Deconstructing gravity: trade costs and extensive and intensive margins," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1149-1172, November.
  6. Mélitz, Jacques, 2002. "Language and Foreign Trade," CEPR Discussion Papers 3590, C.E.P.R. Discussion Papers.
  7. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  8. Lawless, Martina, 2009. "Firm export dynamics and the geography of trade," Journal of International Economics, Elsevier, vol. 77(2), pages 245-254, April.
  9. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  10. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 1095-1131, August.
  11. Andersson, Martin, 2007. "Entry costs and adjustments on the extensive margin - an analysis of how familiarity breeds exports," Working Paper Series in Economics and Institutions of Innovation 81, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  12. Matthieu Crozet & Pamina Koenig, 2007. "Structural gravity equations with intensive and extensive margins," EconomiX Working Papers 2007-36, University of Paris West - Nanterre la Défense, EconomiX.
  13. Bernard, Andrew & Jensen, J Bradford & Redding, Stephen J & Schott, Peter, 2007. "Firms in International Trade," CEPR Discussion Papers 6277, C.E.P.R. Discussion Papers.
  14. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2008. "An Anatomy of International Trade: Evidence from French Firms," NBER Working Papers 14610, National Bureau of Economic Research, Inc.
  15. Baldwin, Richard & Harrigan, James, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," CEPR Discussion Papers 6368, C.E.P.R. Discussion Papers.
  16. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  17. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  18. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
  19. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 489-530, 05.
  20. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
  21. Paulo Bastos & Joana Silva, . "The Quality of a Firm’s Exports: Where you Export to Matters," Discussion Papers 08/18, University of Nottingham, GEP.
  22. Paolo Angelini & Andrea Generale, 2008. "On the Evolution of Firm Size Distributions," American Economic Review, American Economic Association, vol. 98(1), pages 426-38, March.
  23. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-16, May.
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Citations

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Cited by:
  1. Galina Hale & Christopher Candelaria & Julian Caballero & Sergey Borisov, 2013. "Bank linkages and international trade," Working Paper Series 2013-14, Federal Reserve Bank of San Francisco.
  2. Ehrhart, Helene & Le Goff, Maelan & Rocher?, Emmanuel & Singh, Raju Jan, 2014. "Does migration foster exports ? evidence from Africa," Policy Research Working Paper Series 6739, The World Bank.
  3. Cebeci, Tolga & Fernandes, Ana M. & Freund, Caroline & Pierola, Martha Denisse, 2012. "Exporter dynamics database," Policy Research Working Paper Series 6229, The World Bank.
  4. Sanne Hiller, 2013. "Does immigrant employment matter for export sales? Evidence from Denmark," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(2), pages 369-394, June.

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